Govt lowers source tax to 0.7pc for all sectors

Sets 12pc income tax for RMG

FE Report | Published: August 08, 2017 04:05:01 | Updated: October 20, 2017 06:09:55

The government has reduced income tax at source to 0.70 per cent for all the export-oriented sectors, except jute and jute goods sector, which has been enjoying 0.60 per cent tax rate.

The source tax for the export industries was increased to 1.0 per cent from 0.70 per cent in the budget for the current fiscal year (FY), 2017-18.

The Internal Resources Division (IRD) under the Ministry of Finance issued a Statutory Regulatory Order (SRO), dated August 05, in this regard.

The Income Tax Wing under the National Board of Revenue (NBR) issued the SRO with retrospective effect from July 1, 2017. The order will remain effective until June 30, 2018.


The source tax has been reduced to the previous level following demands of the exporters.

Talking to the FE, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Md Siddiqur Rahman welcomed the decision.

"The source tax should be much lower than the reduced rate, considering growth of the export sectors in Bangladesh," he added.


The exporters of various items, including knitwear, woven garments, terry towel, carton and accessories of garment industry, frozen food, vegetables, leather and leather goods, and packed food etc, will enjoy the reduced rate like the previous FY.


Banks deduct the tax at source at the time of crediting export proceeds to the exporters' accounts.

Jute and jute goods exporters have been enjoying 0.60 per cent tax at source from FY 2015-16 that will continue until June 2019.

However, Income Tax Wing feared Tk 9.0 billion shortfall in its projected revenue collection in this FY due to the reduction of tax at source for exporters.

On the basis of tax measures in the national budget, NBR estimated the additional revenue, as the source tax was increased to 1.0 per cent from 0.70 per cent.

According to Income Tax Ordinance 1984, the rate of source tax on export is 1.0 per cent since FY 2015-16. Every year the revenue board reduces the rate through issuing SRO to extend the tax benefit.

Until NBR issues any SRO for reducing the rate, the 1.0 per cent tax at source for export-earning sectors automatically comes into effect as per the income tax ordinance, officials said.


The source tax will be considered as advance tax as well as minimum income tax on export proceeds. The exporters will have to pay additional income tax, if they show additional income from the export sectors in income tax returns, they added.


Meanwhile, NBR also issued another SRO, reducing the corporate income tax for knitwear and woven garments manufacturers and exporters to 12 per cent for FY 2017-18. Last year, the rate was 20 per cent.

There are different corporate income tax rates in the country for different sectors.

The reduced corporate tax rate for RMG exporters has been declared in the budget for FY 2017-18. But NBR issued the SRO on August 5, giving retrospective effect from July 1, 2017.

Green factories, having international green building certification, will enjoy 10 per cent corporate tax rate on their income from export proceedings.



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